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This article appears in the Spring 2016 issue of The American Prospect magazine. Subscribe here.

When Boston Mayor Marty Walsh learned of plans by the city’s public high school students to walk out to protest proposed budget cuts, he told them to stay in class. They didn’t. On a cool, sunny March afternoon, thousands of young people marched through Boston Common and converged on the Massachusetts State House, where the legislature’s Joint Committee on Education was holding a hearing on a ballot question that would significantly increase the number of charter schools.

Brighton High School senior Christopher Gayle left school, too, but he went into the building to testify. Gayle told state lawmakers that he had nothing against charter schools, but he blamed them for the cuts. “They’re taking away money from the Boston Public Schools,” Gayle said.

Boston’s majority-minority public school system is the largest in the state, with nearly 57,000 students. The Massachusetts Board of Elementary and Secondary Education, the sole authorizer of charter schools, recently approved the addition of more than 1,000 seats in several of the city’s existing charter schools. That expansion means that the district will have to transfer millions more in new charter-school tuition payments, on top of the nearly $120 million that already flows from district schools to the publicly financed, independently run charter schools.

Supporters of the Bay State’s traditional public schools have launched a new fight against a bifurcated system that they argue steers public dollars away from district schools across the commonwealth. It’s the state government that charters the new schools, so school district and municipal officials have little say in whether a charter opens in a community and diverts funds.

When a student leaves a school district to attend a charter, that district transfers a tuition payment based on a district’s average per-student expenditure. To mitigate the financial impact of this transfer, a district receives a 100 percent tuition reimbursement from the state the first year but only 25 percent in each of the next five years.

Massachusetts currently has 81 charter schools. (Current state law caps the permitted number at 120.) Of the more than 950,000 public school students in the state, 40,200 (4.2 percent) attend charter schools. A school district’s payments to these schools are designed to not exceed 9 percent of its net expenditures. In the state’s poorest-performing districts, the amount cannot exceed 18 percent. But that could change with the ballot initiative, and Massachusetts’s Republican governor, Charlie Baker, is a big supporter of charter-school expansion.

Charters were originally conceived as incubators that would germinate innovative practices that could be duplicated in traditional public schools. But the emergence of specialized for-profit education-management organizations, which approach running schools as a business, has alarmed some educators. While a for-profit company cannot apply for a charter to run a school in Massachusetts, they can contract with a successful nonprofit applicant to handle a range of administrative matters, from hiring and firing teachers to dealing with facilities issues.

AP Photo/The Christian Science Monitor, Ann Hermes

Students exit school through the front entrance after classes at the Boston Collegiate Charter Middle & High School campus on June 16, 2014 in Dorchester, Massachusetts.

Today, Bay State superintendents, local school committee members, and even some public officials who support charters warn that an unprecedented expansion by way of the ballot box would further erode the resources available for the schools that the vast majority of students attend and would threaten the very schools that they were supposed to help save. Many fear that Massachusetts school districts have reached a tipping point that a sudden, substantial increase in charter schools could easily upend.

THE UTILITY OF CHARTER SCHOOLS in bringing the students in underperforming districts up to the level of the highest achievers elsewhere in the state has been a theme of the public education policy debate in Massachusetts. The state’s public schools consistently come out on top of national education surveys and assessments, and charter schools have helped boost the state’s reputation for K--12 excellence. But that paradigm coexists uneasily with one of the largest achievement gaps in the country, a situation that has fueled the expansion of charter schools, especially in urban areas.

One of the most divisive issues is how state dollars are allocated to charter schools. According to a Massachusetts Teachers Association statewide analysis of fiscal 2016 net tuition payments to charter schools, traditional public school districts are losing nearly $409 million to charters, out of total net school spending by these districts of about $11.6 billion. Tuition transfers hit small districts, which have little room for cost efficiencies, the hardest.

The Triton Regional School District serves 2,700 students in the northeast Massachusetts coastal towns of Salisbury, Newbury, and Rowley. Last year, the district transferred nearly $630,000 in tuition for 51 students who attended Newburyport’s River Valley Charter School. The final budget included $1.5 million in cuts to a nearly $40 million budget.

With a similarly sized school budget in the works for next year, the district currently faces roughly $632,000 in cuts. That means 11 teachers will go. There will be only one math specialist, instead of three, to oversee the debut of a brand-new elementary and middle school math curriculum. Some class sizes in kindergarten through sixth grade will increase. Even those cuts might still not be enough, which leaves the three towns hoping for either an increase in state school assistance or more funds from local taxpayers.

Triton has shed a few hundred students over the past several years, but the enrollment decline masks an even more worrying indicator in the predominantly white district, which directly impacts the district’s budget. The numbers of special-needs students with the greatest challenges have increased. Those children are the most expensive to educate since they require specialized programs and services. District schools continue to grapple with the difficulties posed by having fewer dollars and higher percentages of students who require specialized education. Traditional public schools must provide instruction for every student. Charters, however, are not required to accept the same proportion of low-income or special-needs students that the district schools typically enroll.

“Charters filter out certain kids,” says Christopher Lubienski, a University of Illinois education professor. Low-income students who attend charters “tend to be the advantaged of the disadvantaged,” he says. “The poorest kids and the kids with the most costly special needs still go to public schools.”

A 2015 Massachusetts Association of School Committees study found that although charters do enroll some challenging groups like English-language learners, they are not doing so at the same rates as traditional public schools. Bay State charters also continue to under-enroll poor students, while children with more profound types of disabilities were also under-enrolled or not enrolled at all.

The public schools in the central Massachusetts city of Fitchburg serve about 5,000 students; nearly 50 percent are Latino. An analysis of this year’s state Department of Elementary and Secondary Education data found that while students whose first language was not English comprised more than 30 percent of the district’s students, the three charters that accepted Fitchburg students served lower percentages of those children, ranging from a high of nearly 20 percent at the Advanced Math and Science Academy Charter School in Marlborough to just 3.1 percent at Sizer School in Fitchburg, and a paltry 1 percent at the Francis W. Parker Charter Essential School in Devens. The rates for English-language learners, which make up 10.4 percent of district students, were even lower: Roughly 2 percent of Sizer students were English-language learners; the Academy enrolled 0.1 percent; and Parker, zero percent.

The Fitchburg charters also enroll far fewer economically disadvantaged students: More than 50 percent of Fitchburg students fall into this category in the current academic year. At Sizer, only about 30 percent do. The numbers are even lower at the Advanced Math and Science Academy (5.7 percent) and Parker (3 percent).

AP Photo/The Christian Science Monitor, Melanie Stetson Freeman

High school students at Dearborn Stem Academy, a Boston public school, take a computer science class, on October 28, 2015, in Dorchester, Massachusetts.

Massachusetts does not distinguish between district schools that enroll more challenging children and the charter schools that do not, according to Fitchburg school committee member Sally Cragin. “They get a pass on needing to educate children with the same degree of needs that we have,” she says.

Fitchburg transfers roughly $2 million in tuition payments to the area charter schools. The district also spends about $240,000 annually to transport the Fitchburg students to charter schools. But Fitchburg has more flexibility in its budgets than a small, rural regional district like Triton does. In his decade as superintendent, Andre Ravenelle matched charter competitors’ offerings with programs designed to keep academically talented students in the district, such as the Fitchburg Honors Academy at the city’s high school where students take only honors/pre-–Advanced Placement and Advanced Placement courses.

Pursuing grants and cutting energy and health-care costs has allowed Ravenelle to spare teachers from cuts. Instead, the district has laid off administrators: 12 in the past decade, with three cut just last year. Nevertheless, the district still faces annual deficits between $1 million and $2 million. (He also laments additional fiscal pressures from other district tuition payments that go to vocational-technical schools and other public schools in neighboring communities that Fitchburg students can attend.)

“If the money had not left the district, we wouldn’t be looking at deficits every year,” says Ravenelle, who was named Massachusetts Superintendent of the Year for 2016.

Thus the irony: Charters were intended as a gateway to better public education for the poor. In practice, some of them, especially outside large cities, end up as taxpayer-funded, quasi-private schools for the middle class.

IN FEBRUARY, THE STATE Board of Elementary and Secondary Education approved a charter school serving grades 6 through 12 that would accept students from Brockton, a small city south of Boston with high rates of poverty that has been lauded for the academic achievements of its minority students and has long resisted charter proposals.

Brockton Superintendent Kathleen Smith joined forces with Brockton public officials, including the mayor and the members of its State House delegation, for what proved to be a contentious and unsuccessful effort to convince the board to derail a new charter school proposed for the city. Smith, a 40-year veteran of the school system, is incredulous that the state board approved the New Heights Charter School given what she viewed as its lack of supports for English-language learners and students with disabilities, and an “appalling” middle school curriculum.

She estimates that 315 students would leave for the school and that the district would lose tens of millions of dollars to the charter over a decade—in a district that has already laid off 50 teachers and faces a significant deficit going into the next school year. Because of its weak local property-tax base, the school district relies heavily on state education aid. Meanwhile, a large urban school district like Boston can find economies of scale in other sections of its $1 billion budget in order to avoid cutting core staff and programs. In the wake of Boston’s student protests, Mayor Walsh backtracked from plans to cut a wide swath through high school teachers, support staff, and programs. Instead, district officials plan to look for savings in other areas.

But as charters continue to expand, Boston may run out of options. With statewide expansion currently capped, the Boston district schools have avoided the devastation that has radically reshaped public school districts in places like Cleveland, Detroit, and Washington, D.C. A 2013 Moody’s Investors Service analysis noted that one of the biggest threats to school district stability is continuing to carry certain operations costs as dollars shift away from the traditional public schools. Districts can close schools and move students, but pressure from parents, public officials, and teachers-union leaders may stand in the way of realigning costs to respond to student population declines.

“When you aggregate all the charter providers, I do think that it is accurate that a disproportionate share of resources are going on a per-pupil basis to charters,” says State Senator Sonia Chang-Díaz, who co-chairs the legislature’s education committee and is investigating ways to address the charter cap and other issues before a possible November vote. “It is also the case that money is being drawn away from district schools, not because necessarily too much is going to charters, but because where you once had one schoolhouse … you have two.”

Even a charter advocate like Walsh, a Democrat who testified before the education committee, conceded that under the ballot question, the proposed expansion of up to 12 schools each year would have severe repercussions on the municipal and the school system budgets.

AP Photo/The Christian Science Monitor, Ann Hermes

Students walk past lockers in between classes at the Boston Collegiate Charter Middle & High School campus on June 16, 2014 in Dorchester, Massachusetts.

“If you give us more charter schools without giving us the resources to pay for them, can you imagine what the budget problems will be in the next three, four, five, six, seven years?” Walsh told reporters after the hearing. “It will be daunting.”

CHARTER SCHOOLS IN MASSACHUSETTS were established under the 1993 Education Reform Act. That act was passed in the wake of a ruling by the Supreme Judicial Court, the state’s highest court, which found that Massachusetts had failed to educate “all its children, rich and poor, in every city and town of the Commonwealth at the public school level.”

Property taxes had been the primary sources of school funding, which meant that wealthier municipalities could make the investments in teachers, programs, sports, extracurricular activities, and facilities that less-affluent districts could not. So state lawmakers established a “foundation budget” to furnish each school district with a baseline of annual state aid based on a complex formula designed to level the playing field between districts.

The state Board of Elementary and Secondary Education has the authority to oversee the creation of two types of charter schools: Commonwealth charters, which are established and operated by independent boards of trustees, and Horace Mann charter schools that require approval of local school committees and teachers unions.

To fund charter schools, state officials devised a funding formula whereby the per-pupil expenditure moves from the public school district to the charter school when a student leaves one for the other. This direct competition with district schools continues to be a major issue, according to Paul Reville, a charter-school supporter who served as secretary of education under Governor Deval Patrick and is now an educational policy and administration professor at Harvard’s Graduate School of Education.

“Those who introduced [competition] for the most part claimed that it would spawn a virtuous cycle, and it has some virtuous aspects to it, but it has also spawned a competition between the charter schools and the mainstream schools for scarce public resources,” Reville says. “If we are going to have an extended experiment with making competition available in this space, I think that’s how you have to do it,” he adds. “People want to have competition without pain; well, pain is what drives competition.”

MASSACHUSETTS DEVISED A GENEROUS reimbursement formula to mitigate the early effects of the tuition transfers for districts. But the dirty little secret of charter-school tuition reimbursements is that the state legislature no longer fully funds them, creating a situation that results in charter schools receiving their full per-student allotment, while district schools do not receive a full reimbursement.

Yet municipal and school officials’ dissatisfaction with charter-school funding is also rooted in frustration with a deeper systemic flaw. The formula that determines how much state education aid flows to school districts has not been updated since 1993, so aid has failed to keep pace with major cost drivers like employee health care and special education.

In a 2011 report, the Massachusetts Budget and Policy Center estimated that schools are underfunded by at least $2 billion. “I just find it amazing that the conversation we have is about charter schools and not about fully funding public schools,” says Barbara Madeloni, the head of the Massachusetts Teachers Association, the state’s largest teachers union.

But even though a state commission recently recommended rebooting the foundation budget formula, the overwhelmingly Democratic and tax-averse state legislature has been slow to respond, since the real culprit is the lack of new revenues. Under House Speaker Robert DeLeo, a charter proponent who is also opposed to new taxes, proposals to restructure the formula to reflect current costs go nowhere.

Given the magnitude of the problem, Governor Charlie Baker’s proposals for small increases in education funding and tuition reimbursements were greeted with a notable lack of enthusiasm. A separate Baker administration proposal to compress tuition reimbursement payments into a three-year period down from the current six-year cycle has not allayed fears that state lawmakers may not live up to that schedule either, which is why many municipal and school district officials view proposals to increase the number of charter schools with apprehension.

If the state lawmakers fail to craft a compromise on the charter-cap dilemma in the coming months, charter-school advocates are poised to move the question to the November ballot where both sides are likely to spend unprecedented millions to influence voters. That’s a scenario that most educators and public officials would prefer to avoid. A pro-charter public awareness campaign, supported by the governor, drew a rare rebuke from the state auditor over the use of “incomplete” state education charter-school waiting-list statistics. Baker’s strong support for lifting the cap continues to alarm charter-school opponents.

AP Photo/Stephan Savoia

Members of the Massachusetts Teachers Association rally outside the Statehouse in Boston on February 22, 2011.

Senate President Stanley Rosenberg designated a group of senators, including Chang-Díaz, the education committee co-chair, to consider a broader slate of charter-school reforms, including controversial issues like serving high needs students in addition to lifting the cap on the number of charter schools. It’s a risky move, since both the House and advocacy groups on either side of the issue really do not want to re-open a wider debate on charters.

As Massachusetts lawmakers study their options, what is clear is that lifting the cap on charter schools without new revenues, or even tinkering with the current tuition-reimbursement formula, is a recipe for further fiscal distress in the school districts. Chang-Díaz believes that state lawmakers can do right by both groups and would like to see a mechanism that ties together a modest lift in the charter-school cap with full funding of the district impact mitigation formula. The statewide school superintendents’ association came up with a proposal to substitute a flat per-student rate that matches the tuition districts pay under “school choice,” a program that allows parents to send children to traditional public schools in participating neighboring communities. The state would make up the difference between that flat amount (currently $5,000) and the per-pupil expenditure. Having the state assume more of the costs that school districts currently face is a pragmatic answer to this funding question, but it requires more state funds.

THIS EMERGING CRISIS is not unique to Massachusetts. In the first decision of its kind in the country, the Washington State Supreme Court ruled last year that charters were unconstitutional: Since charters were not locally controlled or governed, they were therefore ineligible for state funds. The high court noted that “money that is dedicated to [public] schools is unconstitutionally diverted to charter schools.” The court decision set off a scramble by lawmakers in Olympia to find another way to fund the charter schools currently operating in the state. State courts in Arizona and Texas have also ruled against charter-school advocates seeking equal funding with traditional public schools.

However, in Washington, D.C., the script has been flipped. The D.C. Association of Chartered Public Schools and two charter schools filed a lawsuit alleging that the District of Columbia spends less on charter-school students than it does on other students. Last year, the U.S. District Court for the District of Columbia agreed to hear arguments in the case.

Meanwhile, after the Massachusetts state education board’s decision to approve the Brockton charter school, Brockton Superintendent Smith vowed to press ahead with a new lawsuit that would revisit how public education gets funded—now that there are two types of schools that are trying to co-exist. Such a development would hark back to the more than two-decades-old court case that originally helped pave the way for the charter schools. The ironies abound. The lead plaintiff in that case was a Brockton student who went on to become a teacher in a district public school.

“This is a broken system,” Smith says. “Funding should not be about ‘them’ and ‘us.’”